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Biden’s delay on foreclosures ignores harm to marketplace as COVID-19 crisis wanes

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Gryphon USA president Richard Kruse said the Biden administration’s move this week to extend the 12-month moratorium on home mortgage foreclosures through June 30 undermines the vitality of the nation’s housing market as health and economic conditions that prompted the federal policy begin to subside. “The unprecedented federal interference into the private housing market due to the COVID-19 pandemic certainly stabilized the shelter of Americans in a healthcare emergency which is positive,” Kruse said. “However, extension of the foreclosure ban beyond the March 31 expiration fails to recognize the success of social distancing and vaccination programs against the initial emergency policy.” Federal agencies in late December extended the original moratorium to March 31 in recognition that the Biden administration might want to take another look at the situation. They did and have put forward an extreme policy not spending the effort to direct relief at those who truly need it.  Kruse adds that the extension only addresses half of the problem and keeps landlords in the dark regarding how to seek the cash flow to pay their mortgages and maintenance costs. The new extension is silent on evictions leaving landlords questioning when they may retake possession of their properties that are currently not producing income. “Landlord complaints of tenants taking advantage of the system even if they could afford payments aren’t even addressed here continuing to show deference to the tenant but not provide recourse to those that provide housing,” says Kruse.   That announcement of a coordinated extension of forbearance of loans backed by the Department of Housing and Urban Development (HUD) follows the Federal Housing Finance Agency’s announcement it would extend its moratoria on loans owned by Fannie Mae and Freddie Mac. An estimated 1 out of 5 renters are believed to be behind on their rent while 2.7 million homeowners are currently in foreclosure forbearance, according to the White House. Bubba Mills, a partner at Gryphon, stated “The move by our government is not providing a solution to the situation. It is actually causing more damage than good. Without allowing banks and investors to take a “Normal Course of Action” it is affecting more than renters and landlords. When mortgage payments are not being made, neither are taxes and HOA dues. In 2008 cities and counties ran out of money because no one was making payments. Continuing to kick this can down the road even longer continues to move this pandemic from a health problem into much more dire economic problem.” Kruse added that lifting of the foreclosure moratorium in July will not immediately mean relief for lenders and landlords as it will take several months for legal actions to commence. Still, Kruse expressed optimism that the June 30 date will solidify into a real expiration date so the market can begin working out the damage in a post-COVID environment.  For more information on this topic, contact Richard Kruse at 614-774-4118 or rfk@gryphonusa.com.

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Almost Half of U.S. Counties at Above-Average Risk for Increased Rental Property Defaults

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A new analysis released today from RealtyTrac shows that single-family rental property owners in 48% of all U.S. counties are at above average risk for default. The RealtyTrac Rental Property Risk Report gauges the relative default risk of single-family rental homes, almost 90% of which are owned by mom-and-pop investors who own fewer than 10 properties. The financial impact of COVID-19, resulting job losses, and government-imposed eviction moratoria have all contributed to reduced on-time rental payments which, in turn, can lead to potential default among these smaller investors, many of whom are highly leveraged based on loan-to-value (LTV) ratio data. According to the research, the average risk score among the country’s 3,143 counties is 50.2, with 1,514, or 48%, at above-average risk. When looking at the largest 100 counties – based on the total number of properties – the average risk score is 43.6, with 53% at above-average risk. Among these large counties, Florida, New York, and California counties accounted for 44% of the 25 most at-risk counties. New York (Erie, Kings, Monroe, and New York Counties) and Florida (Collier, Lee, Polk, and Marion) each had four counties in the top 25 ranking, and California (Kern, Riverside, and San Bernardino) had three. Mohave County in Arizona was rated as the most at-risk of the 100 largest counties in the country. “The job losses in a handful of severely impacted industries due to the COVID-19 recession have disproportionately affected renters,” said Rick Sharga, RealtyTrac executive vice president. “Federal, state, and local governments have responded by enacting eviction bans to protect tenants, but in doing so have inadvertently put many landlords at risk. And the longer the eviction bans are in place, the higher the likelihood that these landlords are going to default on their mortgages, declare bankruptcy, or be forced to sell off properties at distressed pricing, which could have a negative impact on local housing markets.” The RealtyTrac Rental Property Risk Report, using real estate and mortgage records from ATTOM Data Solutions, analyzed data from the 3,143 counties across the United States against three criteria to determine which counties might be the most at-risk of single-family rental properties going into default: the percentage of properties in the county that were rental units; the unemployment rate in the county; and the degree to which rental properties were leveraged (the loan-to-value ratio). A weighted average was created using those criteria on a scale of 0-100, with 100 representing the highest potential risk. Counties with a high percentage of rental properties, high unemployment rates, and high LTV ratios had a higher risk score; while counties with a low percentage of rental properties, low unemployment rates, and low LTV ratios were considered less at risk. Of the 100 largest counties, Mohave County in Arizona had the highest risk score at 77.2, due to a high percentage of rental properties (79%) and a higher-than-average unemployment rate (8.7%). Salt Lake County in Utah had the lowest risk score at 17.2, reflecting the county’s relatively low percentage of single-family rental homes, low LTV ratios and low unemployment rate. “While it’s completely appropriate that the government has taken steps to protect tenants from eviction during a global pandemic, it’s also completely unrealistic to assume that landlords can bear 100% of the financial burden of missed rent payments,” Sharga noted. “There’s a misperception that most landlords are corporations or institutional investors. The fact is that almost 90% of single-family rental landlords are smaller investors who own fewer than 10 properties, are often highly leveraged, and simply don’t have the financial strength to weather this storm. And financial failure by these investors has implications for both their tenants and the communities where their rental properties are located.” Six States Account for a More Than a Quarter of Highest-Risk Large Counties Of the 100 largest counties with higher-than-average risk scores, those located in six states accounted for 27%: Florida (7), New York (5), California (4), Ohio (4), Texas (4) and Illinois (3). Four states had two counties each with above-average risk scores – Arizona, Connecticut, Maryland, and Michigan. No other state had more than one of the 100 largest counties with an above-average risk score. The average unemployment rate for all of the 100 largest counties with above-average risk scores was almost a full point higher than the national average (7.62%). But while unemployment rates were one of the three criteria used to assess risk, there wasn’t always a direct correlation between a state’s unemployment rate and above-average risk scores. While California (9.0%) and New York (8.2%) had two of the highest unemployment rates in the country, Florida, which had the highest number of at-risk counties among the 100 largest, had an unemployment rate below the national average (6.1% vs. 6.7%), as did Ohio (5.5%). Regionally, the Midwest has the highest number of large counties with above-average risk scores with 12, followed by the Northeast with 11, the Southeast with 10, the West with eight, and the South with six. “Despite the pandemic, default activity is at its lowest level in decades, and the government and mortgage industry are working together to prevent unnecessary foreclosures and evictions,” Sharga said. “But there needs to be a concerted effort to backstop the landlords as well, or numerous counties across the country are going to see rising levels of foreclosures on rental properties and needless financial distress.” About RealtyTrac Founded in 1996, RealtyTrac publishes the largest database of foreclosure property information in the U.S. along with other real estate and mortgage data used by real estate investors and professionals to find, analyze and purchase residential and commercial distressed properties. RealtyTrac is owned and operated by ATTOM Data Solutions, a leading provider of publicly recorded tax, deed, mortgage and foreclosure data as well as proprietary neighborhood and parcel-level risk data for more than 150 million U.S. properties.

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Pay Ready Eliminates Friction for Resident Payments As Moratoriums Extend

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Pay Ready Inc., (formerly Debt Logic) a cloud based software where clients can manage and track everything debt related in one place, has proven to benefit companies in the multi housing sector. Knowing that there are major gaps in communication, technology, and trust from the time a file is determined to be delinquent throughout the collection process, Pay Ready deploys ongoing automation and statistically based solutions to improve collection performance while eliminating friction. Pay Ready’s capabilities cover Accounts Receivable (AR) management, resident payments and Customer Relation Management (CRM) engagement. Pay Ready’s remote software allows property managers to better view, engage and communicate with their residents, employees and vendors to achieve control over their total balance sheet. “Working with the Pay Ready Team has been a pleasure from pre to post roll-out. The transition process was effortless and the customer service provided to our teams has continued to make the partnership a valuable one. Having Pay Ready as our “in-house collections” department has taken the stress of collecting off of our teams on site,” said Lillian Mumford, Operations Process Manager at Mission Rock Residential.  “The reporting provided to our on site teams makes the posting of payments an easy process. The Pay Ready Dashboard gives me a quick snapshot of performance, and the reporting allows us to drill down when needed.” Pay Ready’s growing suite of products include: Pay Ready Exchange: secure online data exchange, where property managers can sync resident files in their accounting software to a virtual office in Pay Ready, for a global view and management of AR revenue, payments and resident engagement campaigns. Portable Payments Ready: mobile-first, device agnostic online payments processing with seamless integration into Pay Ready’s multi-experience resident touchpoints and third-party enterprise software. Supports resident payments through move-out and beyond. Team Ready: a multi-experience resident contact center and software helpdesk on the cloud, which allows property managers to collaborate and support their residents through email, phone, texts, and web portals. CRM Ready: a full featured CRM bundled with Pay Ready’s multi-experience resident touchpoints and unified user experience, for engagement teams handling high-velocity contacts. Pay Ready Marketplace: an online B2B marketplace and vendor/revenue management solution, to address the growing complexity of property management AR needs through a simple and powerful interface. Pay Ready Marketplace instantly connects property manager’s accounts with registered service vendors. To learn more, visit the new Pay Ready website at www.payready.com

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EXIT Realty Corp. International Adds NetSheet™ to Premier Partner Program

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NetSheet™, a company which provides brokerages and their agents with the ability to generate accurate buyer and seller estimates through a seamless integration with their preferred title companies right on their real estate websites, announced its strategic partnership launch with EXIT Realty Corp. International.  With this partnership, EXIT has positioned its network with the ability to provide their clients and consumers with the accurate information they want when they want it. NetSheet™ is a simple yet revolutionary tool that will empower EXIT brokerages and their agents to provide accurate and timely buyer and seller estimates that is designed to fast track listing properties, buying properties, and selling properties. “We’re proud to join the EXIT Premier Partner program as a trusted partner and to bring our solution to the EXIT network,” said Leza VanBeuren, SVP, NetSheet™. “NetSheet™ provides a simple yet sophisticated tool that is easy to use, mobile ready and designed to drive engagement and can greatly enhance the real estate experience for homebuyers and sellers. We’re excited for the opportunity to work with EXIT professionals.” “EXIT Realty enjoys tremendous momentum throughout the U.S. and we are thrilled to enhance our portfolio with the best-in-class solution NetSheet™ provides,” said Tami Bonnell, CEO, EXIT Realty Corp. International. ” NetSheet™ gives our sales professionals an easy-to-use solution that provides accurate information they need to provide a next level consumer experience that can fast track their transactions. This is a win/win for our brokers, sales associates and the clients and consumers they serve.” For more information about NetSheet™ visit NetSheet.com.

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Austin, Atlanta & Tampa Are Attracting Homebuyers From More Expensive Cities, Contributing to a Housing Supply Crunch

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Nationwide, 27.8% of Redfin.com users looked to move to another metro area in 2020, according to a new report from Redfin (www.redfin.com), the technology-powered real estate brokerage. That’s up from 25.5% in 2019, a 9% year-over-year increase. The increase is driven by people leaving expensive coastal areas for relatively affordable places. The uptick in migration is exacerbating the severe shortage of homes for sale in 2021. In December, supply was down a record 34% year over year nationwide. The supply of homes for sale is down by double digits from last year in all 10 of the nation’s most popular migration destinations, including Phoenix, Austin, Las Vegas and a handful of southeastern metros. Meanwhile, the only areas supply is up are the places people are leaving: the San Francisco Bay Area, New York and Los Angeles.  “People aren’t moving to places with more homes available to buy; they’re moving to places with more affordable homes to buy,” said Redfin chief economist Daryl Fairweather. “Remote workers leaving expensive places for relatively affordable areas, partly because the allure of more house for less money is strong, is exacerbating housing supply shortages in more affordable parts of the country. The inventory crunch in popular destinations could intensify over the next few years as remote workers continue to relocate and buy homes. If developers, zoning boards and local governments prioritize building homes in the affordable areas people are moving into as opposed to coastal cities, that would help combat the housing shortage.” The biggest cities in the country lost the most residents in 2020; New York, Los Angeles and the Bay Area are the only places where inventory rose year over year  Redfin estimates that New York lost roughly 275,000 residents to other metros in 2020, a bigger net outflow than any other metro in the U.S. It’s followed by Los Angeles, which had a net outflow of about 125,000 residents, and Chicago, which lost 110,000 residents. A net outflow means more people moved out of the metro than moved in, while a net inflow means more people moved into a metro than moved out. The estimate of net inflows and net outflows noted in Redfin’s analysis are based on data from Redfin.com and the U.S. Census Bureau. New York, Los Angeles and Chicago are the three largest metro areas in the U.S, and New York and Los Angeles are home to some of the most expensive real estate in the country. Although Chicago’s median home price is relatively low, all three places are major employment centers with a lot of white-collar jobs that are conducive to remote work.   “For the past two years I’ve felt like everyone is leaving Los Angeles, and that has intensified during the pandemic,” said Los Angeles Redfin agent Lindsay Katz. “More than half of my sellers are moving to a different area. A lot of young families are moving back to their hometowns to be near their parents, moves they can now make because they’re working remotely. People are realizing that if they leave Los Angeles and move to a place like the Midwest or Florida, they can afford to live on just one income because their mortgage is cut in half and tax bills are lower.” Those cities are followed by the Bay Area—which lost roughly 45,000 residents in 2020—Detroit, Seattle, Boston, Miami, Washington, D.C. and Baton Rouge, LA, a list that includes several other expensive coastal cities with many companies that offer remote work.  Although the country as a whole is facing a drastic housing supply shortage, three of the four metros that lost the most residents in 2020—New York, Los Angeles and the Bay Area—saw year-over-year increases in the number of homes for sale. They were the only metros in the U.S. where supply rose.  The number of homes for sale in New York increased 27.7% year over year in December, and in Los Angeles it increased 1.4%. In San Francisco, supply rose 76.7% from the year before, a far bigger increase than any other metro, and in San Jose and Oakland—two other Bay Area metros—supply was up 24.6% and 7.6%, respectively.  Supply was down in Seattle, Boston and Washington, D.C., but the year-over-year drops (-7.9%, -7.7%, -5%) were smaller than nearly every other U.S. metro.  Relatively affordable southern and southwestern metros gained the most residents in 2020, and they all experienced double-digit supply drops  Phoenix gained roughly 80,000 new residents in 2020, a bigger net inflow than any other metro area. Next come Dallas, with a net inflow of 75,000, and Orlando, which welcomed 60,000 new residents. They’re followed by Tampa, Austin, Las Vegas, Atlanta, Greenville, SC, Charlotte and Knoxville.  Those are all relatively affordable areas, with the typical home selling for close to or less than the national median of $335,000. Southern metros dominate the most popular destinations, and they’re joined by two Southwestern places—Phoenix and Las Vegas—that are popular with people leaving coastal California. The number of homes for sale in December was down by at least 16% from the year before in all 10 of the most popular migration destinations. Housing supply was down 18% year over year in Phoenix, 35.7% in Dallas and 16.3% in Orlando. Inventory was down in 83 of the 88 metros included in Redfin’s housing inventory analysis. “Phoenix has always been popular with people moving in from out of state because of its beautiful landscape, warm weather and affordability, but 2020 was beyond anything I’ve ever seen,” said local Redfin agent Van Welborn. “Remote workers realize they can keep their high-paying jobs without paying California taxes, and they’re comparing what kind of home they can get in Phoenix versus Los Angeles or the Bay Area. I’m working with one couple moving here from the Bay Area and another from Seattle; neither of them would have been able to make the move if they weren’t working remotely. The couple from Seattle paid $800,000 for a big, beautiful house.”   “But even though Phoenix is affordable compared to other places, prices have risen significantly over the last year,” Welborn continued. “Locals are having a hard time getting their offers accepted because there are so few homes on the market, and often someone from California will put in a competing offer at a higher price and waive the appraisal.” Seven of the top 10 destinations—Phoenix, Dallas, Austin, Las Vegas, Greenville, Charlotte and Knoxville—gained more residents in 2020 than any year in at least a decade. The other three—Orlando, Tampa and Atlanta—gained more residents than any year in the last decade except 2016.  With the number of building permits up from a year ago in

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CIVIC FINANCIAL SERVICES ANNOUNCES ACQUISITION BY PACWEST BANCORP

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Civic Financial Services, LLC (“CIVIC”) announced today that Pacific Western Bank has purchased the company from Wedgewood, LLC (“Wedgewood”). Based in Redondo Beach, Calif., CIVIC is one of the leading institutional private lenders in the U.S. specializing in originating residential business-purpose loans (BPLs). Terms of the agreement were not disclosed. CIVIC was founded in 2014 through a partnership between Wedgewood and one of its subsidiaries, HMC Assets, to serve investors who did not fit within traditional real estate lending criteria. The company will operate as a wholly owned subsidiary of PacWest Bancorp, while William J. Tessar will continue to serve as CIVIC’s President. Since its inception, CIVIC has funded more than 10,000 loans to real estate investors for more than $4.4 billion. In 2020, the company funded more than $1 billion amidst a pandemic that caused other private lenders to pause operations or exit the market. The company has also received several awards for being one of the best places to work in the financial industry. The acquisition advances Pacific Western Bank’s strategy to expand its lending portfolio and diversify its revenue streams. “We believe there is growth and earning potential in the residential BPL space,” said Pacific Western Bank President and CEO, Matt Wagner. “This acquisition opens the door for us to grow in the private lending space with a proven market leader, creating value for both of our organizations. We are excited to welcome the talented CIVIC team to Pacific Western Bank.” “As a part of PacWest Bancorp, CIVIC is poised to dominate our market more fiercely than ever before,” said Tessar. “More importantly, PacWest Bancorp shares the values our company has been built upon as well as our vision and goals. With a strong capital base, we have the ability to continue to invest in scaling our infrastructure and operations and expand into new markets. CIVIC customers will continue to experience our outstanding service with an even broader array of competitive financing solutions to help them grow their businesses.” Evercore acted as the exclusive financial advisor to Wedgewood in connection with the sale of CIVIC to Pacific Western Bank. ABOUT PACWEST BANCORPPacWest Bancorp (“PacWest”) is a bank holding company with over $29 billion in assets headquartered in Los Angeles, California, with executive offices in Denver, Colorado, with one wholly owned banking subsidiary, Pacific Western Bank (the “Bank”). The Bank has 70 full-service branches located in California, one branch located in Durham, North Carolina, and one branch located in Denver, Colorado. The Bank provides community banking products including lending and comprehensive deposit and treasury management services to small and medium-sized businesses conducted primarily through our California-based branch offices and Denver, Colorado branch office. The Bank offers national lending products including asset-based, equipment, and real estate loans and treasury management services to established middle-market businesses on a national basis. The Bank also offers venture banking products including a comprehensive suite of financial services focused on entrepreneurial and venture-backed businesses and their venture capital and private equity investors, with offices located in key innovation hubs across the United States.  For more information about PacWest Bancorp or Pacific Western Bank, visit www.pacwest.com. ABOUT CIVIC FINANCIAL SERVICES, LLC. Civic Financial Services, LLC is a leading institutional private money lender specializing in the financing of non-owner-occupied investment properties. Having funded more than $4 billion and 10,000 loans, CIVIC helps resourceful investors leverage opportunities to grow their real estate portfolios. As a direct lender offering an array of financing solutions for retail, wholesale, and correspondent channels, CIVIC maintains all operations in-house so loans are managed closely, quickly, and efficiently. For more information, please visit www.civicfs.com.

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